Regional Heterogeneity of Government Expenditure Multipliers in Poland

The study analyzes the regional heterogeneity of the impact of government expenditure on Polish voivodships. The aim of the paper is to estimate regional fiscal multipliers in Poland. The empirical research is based on the structural vector autoregression model with the identification scheme proposed by Blanchard and Perotti. The estimations were carried out on the basis of quarterly data covering the period 2000Q1–2022Q4. The empirical results show that the regional effects of government expenditure are characterized by a high level of heterogeneity. The static fiscal multipliers range from 0.17 to 0.55, and the strongest impact of government expenditure on the level of employment occurs in the eastern voivodships of Poland. Thus, the results have important policy implications — the eastern Polish voivodships are among those with below-average economic development, so an expansive fiscal policy may contribute to reducing differences in economic development and enhance regional convergence in Poland. However, the empirical results also indicate that expansionary fiscal policy has the most permanent impact on the labor market in the Mazowieckie Voivodship, which is the richest Polish voivodship. It means that although expansionary fiscal policy in Poland, in the short term, is an effective tool of reducing inequalities in its regional economic development, in the long term, it may lead to an increase in disproportions between the economic development of the richest region and other Polish voivodships.